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BLOG: What can we learn from the best performing ISA funds since 1999?

Emma Lunn
Written By:
Emma Lunn

It has been 22 years since ISAs were launched in order to make saving more accessible to the mass market, and on the whole they have been a success.

Since 1999 we have seen events such as the tech bubble bursting, and most recently the Covid pandemic affect markets in a major way, and investors have felt the brunt of this.

However, over the long term there are funds which have clearly fared well despite recent market fluctuations that may muddy the picture somewhat. Over the past two decades there are clear themes present to illustrate why some of these have done so well.

Best Performing Funds

Fund Name Total Returns since 6th April 1999 Total Return of £500 invested since April 6th 1999
Marlborough Special Situations in GB 3552.33 18261.64
Baillie Gifford Global Discovery TR in GB** 1915.04 10075.2
Schroder ISF Greater China in GB 1833.64 9668.2
Threadneedle European Smaller Companies in GB 1703.22 9016.08
Stewart Investors Asia Pacific and Japan Sustainability in GB** 1662.05 8810.25
Artemis UK Smaller Companies in GB 1632.44 8662.19
BlackRock UK Smaller Companies in GB 1611.4 8557
Baillie Gifford Emerging Markets Growth TR in GB** 1529.71 8148.57
Janus Henderson European Smaller Companies in GB 1473.93 7869.63
TB Amati UK Smaller Companies in GB** 1469.92 7849.59

* Source FE Analytics 6th April 1999 to 24th March 2021. Total Return in Pounds Sterling

The list of best performing funds highlights some interesting long-term trends that have been working through markets over the past two decades.

Firstly, it shouldn’t come as a surprise that all the funds are actively managed. This is because a passive solution will track a market but only actively managed funds will outperform it.

The top 10 funds list is dominated by smaller companies funds which can be explained by two important reasons. Firstly, smaller companies have the potential for larger growth. A smaller company can generally grow many times more than a larger company, potentially becoming a global leader itself.

Secondly, this area of the market is less efficient. Fewer people analyse smaller companies which means that those who spend the time can find overlooked opportunities that potentially deliver an additional return.

The list also highlights one long-term theme that has supported markets – the growth of China. The Chinese economy has been growing strongly over the past 20 years and looks set to continue, albeit at a slower pace. The overall journey for Chinese equities has been mixed – an initial bull run was cut back by the global financial crisis, but the overall trend has tilted toward high growth.

The lack of technology funds goes against what many investors might expect, however. This will largely be thanks to the dotcom bubble. When it burst many company valuations dropped by more than 90% with funds suffering similar poor performance. Many didn’t survive the fallout.

It is only in the past five years or so that tech has really rebounded. Even then it has been dominated by a small selection of stocks. It is not strong short-term performance that gets you to the top of this list but strong, consistent long-term performance as over the years compounding really adds value.

Worst performing funds

Fund Name Total Returns since 6th April 1999 Total Return of £500 invested since April 6th 1999
Premier Miton UK Money Market TR in GB 50.07 750.33
Schroder ISF Global Energy TR in GB 49.61 748.07
Invesco Money (UK) in GB 48.44 742.18
Smith & Williamson Cash TR in GB 47.5 737.51
L&G Cash Trust in GB** 46.74 733.72
ASI Sterling Money Market in GB 45.9 729.48
Fidelity Cash in GB 44.74 723.68
BlackRock Cash in GB 44.5 722.5
Scottish Widows Cash in GB 36.19 680.94
Schroder Institutional Growth in GB 18.06 590.3

* Source FE Analytics 6th April 1999 to 24th March 2021. Total Return in Pounds Sterling

The worst performing funds are largely those that invest in cash or cash-like assets but, even then, they delivered a positive return over 22 years. This does not mean that all funds deliver a positive return as poor performing and loss-making funds are often the ones that get wound up and closed so disappear.

Among the poor performing funds are energy-specific strategies, which reflect the risks of picking a sector to invest in, as well as the timing of the data. Energy stocks are still in recovery from global lockdowns so performance looks bad over the longer term.

While this gives you a snapshot of the best and worst performing funds over the past two decades, it is important to put this in context.

Firstly, many funds that have done well in recent years don’t feature because they weren’t around when ISAs were launched in 1999 and secondly, past performance shouldn’t be a guide to the future.

Company’s and fund managers change, and the processes which worked for stock selection and fund analysis in the past may not work again in the future. The key to successful investing is to have a mix of different strategies and focus on the longer term.

Adrian Lowcock is head of personal investing at Willis Owen